Indiana Ins. Co. v. AMERICAN COMMUNITY SVCS., INC.

• Decision Date: 05 November 1999
• Docket Number: No. 46A05-9809-CV-481.,46A05-9809-CV-481.
• Citation: 718 N.E.2d 1147
• Parties: INDIANA INSURANCE COMPANY, Appellant-Plaintiff, v. AMERICAN COMMUNITY SERVICES, INC., and Donald Scott, Appellees-Defendants, and Ashley Smith, Janet Smith, individually and as next friend of Shanelle Tinka Warren-Smith and Candice Symone Warren-Smith, minors, and Crystal Warren-Smith, Appellees-Intervenors.
• Court: Indiana Appellate Court

718 N.E.2d 1147

INDIANA INSURANCE COMPANY, Appellant-Plaintiff, v. AMERICAN COMMUNITY SERVICES, INC., and Donald Scott, Appellees-Defendants, and Ashley Smith, Janet Smith, individually and as next friend of Shanelle Tinka Warren-Smith and Candice Symone Warren-Smith, minors, and Crystal Warren-Smith, Appellees-Intervenors.

No. 46A05-9809-CV-481.

Court of Appeals of Indiana.

November 5, 1999.

Michael D. Sears, Jason M. Massaro, Singleton, Crist, Austgen & Sears, Munster, Indiana, Attorneys for Appellant.

Gene M. Jones, Mark A. Lienhoop, Newby, Lewis, Kaminski & Jones, LaPorte, Indiana, John H. Lovell, Lovell, Lovell & Newsom, L.L.P., Amarillo, Texas, Attorneys for Appellees.

OPINION

BROOK, Judge.

Case Summary

Appellant-plaintiff/cross-appellee Indiana Insurance Company ("Indiana Insurance") appeals the trial court's order denying its motion for summary judgment on its declaratory judgment claim. Appellees-defendants/cross-appellants American Community Services ("ACS") and Donald Scott ("Scott") and appellees-intervenors Ashley Smith, Janet Smith, Shanelle Tinka Warren Smith, Candice Symone Warren Smith, and Crystal Warren Smith ("the Smiths")¹ appeal the trial court's order denying their motion for summary judgment. We affirm the judgment of the trial court.

Issues

Both Indiana Insurance and ACS present several issues for our review. We dispose of all issues by resolving the following two restated issues:

(1) whether Indiana Insurance and ACS designated evidence sufficient to demonstrate that there is no genuine issue of material fact such that summary judgment must be awarded to either party as a matter of law; and

(2) whether the parties are collaterally estopped by the findings and conclusions of two Texas courts from litigating the issue of insurance coverage in Indiana state court.

Facts and Procedural History

Our review of the record reveals the following facts most favorable to the decision of the trial court: Basil Smith ("Smith") was killed and Charles Harrington ("Harrington") was injured in a single-vehicle accident in Oldham County, Texas, on October 11, 1992. Harrington and Smith, magazine salesmen for ACS, were sleeping passengers in a van driven by Clayton Isaac ("Isaac") and owned by Jane and Andre Walker ("the Walkers"),² who had an independent contractor relationship with ACS; Isaac was the Walkers' employee. The business arrangement between ACS and the Walkers was that the Walkers would furnish the vans that were used to transport the magazine salesmen.

At the time of the accident, ACS had obtained two insurance policies from Indiana Insurance: a standard "IndiPack Liability Coverage Policy of Insurance" (the "IndiPack Policy") and a "Comprehensive Excess Liability Policy" (the "Excess Policy"). The IndiPack policy had been amended with an endorsement that read in pertinent part:

THIS ENDORSEMENT CHANGES THE POLICY. PLEASE READ IT CAREFULLY

HIRED AUTO AND NON-OWNED AUTO LIABILITY

This endorsement modifies insurance provided under the following:

INDIPACK POLICY

A. Insurance is provided only for those coverages which are shown in the Declarations.

1. HIRED AUTO LIABILITY

The insurance provided under the IndiPack Liability Coverage Form, paragraph A.1. Business Liability, applies to "bodily injury" or "property damage" arising out of the maintenance or use of a "hired auto" by you or your employee in the course of your business.

2. NON-OWNED AUTO LIABILITY

The insurance provided under the IndiPack Liability Coverage Form, Paragraph A.1. Business Liability, applies to "bodily injury" or "property damage" arising out of the use of any "non-owned auto" in your business by any person other than you....

C. The following additional definitions apply:

2. "Hired auto" means any "auto" you lease, hire or borrow. This does not include any "auto" you lease, hire or borrow from any of your employees or members of their households, or from any partner or executive officer of yours.

3. "Non-owned auto" means any "auto" you do not own, lease, hire or borrow which is used in connection with your business. However, if you are a partnership, a "non-owned auto" does not include any "auto" owned by any partner.³

Procedural History—Harrington

On December 16, 1992, Harrington sued ACS, the Walkers, Paragon, and Isaac in federal court in Texas ("the Texas court").⁴ Initially, Indiana Insurance defended ACS in the Harrington suit; however, Indiana Insurance sent a letter dated January 4, 1994,⁵ to ACS president Scott, expressing a reservation of rights. The letter also "direct[ed]" Mr. Scott's "attention to exclusion (e) of the policy which excludes bodily injury to an employee of the insured ... [and to] exclusion (j) of the policy which provides that there is no insurance coverage for bodily injury or property damage arising out of the ownership, maintenance, use or entrustment of any auto owned by the insured."

The Harrington suit was tried to a jury in the Texas court. On February 16, 1994, a final judgment of $300,000 was entered in favor of Harrington against Isaac, ACS, and the Walkers ("the Harrington judgment").⁶

In response to the Harrington judgment, Indiana Insurance filed a complaint for declaratory relief against ACS and Scott⁷ in the LaPorte Superior Court on March 14, 1994 (the "Harrington declaratory action"), seeking a determination that neither of its policies issued to ACS afforded ACS any right of indemnification for the Harrington judgment. ACS's answer stated that Indiana Insurance had agreed to represent ACS under the terms of the policy issued and had therefore waived any right to deny coverage and should be estopped from so doing. Among other affirmative defenses, ACS asserted that Harrington was not an employee of ACS. Finally, ACS counter-claimed that by reserving its rights within days of the trial in the Harrington suit, Indiana Insurance had breached the agreement between the parties, which was an act of bad faith.

Indiana Insurance moved for summary judgment in the Harrington declaratory action on April 30, 1998, asserting that there was "no genuine issue that the van driven by Isaac was neither a `hired auto' nor a `non-owned auto' as defined under the [hired auto and non-owned auto liability endorsements]," and as such, there was "no genuine issue that there is no coverage under the IndiPack Policy" or under the Excess Policy, and that Indiana Insurance was entitled to declaratory judgment as a matter of law. In support of this summary judgment motion, Indiana Insurance submitted among its designated evidence its request for admissions and ACS's answers thereto.⁸

In response to Indiana Insurance's summary judgment motion, on June 11, 1998, ACS moved to withdraw its admissions in the Harrington declaratory action. On June 15, 1998, ACS filed its own motion for partial summary judgment on its policy coverage and breach of contract claims, a brief in response to Indiana Insurance's summary judgment motion, and a motion for abatement regarding the issue of coverage under the Excess Policy.⁹

ACS asserted more than ten different grounds for summary judgment in its favor. The two arguments pertinent to this appeal are (1) that as a matter of law, the van "was either a borrowed `hired auto' or a `non-owned auto'" and (2) that as a matter of law, Harrington and Smith could not have been in the course of their employment when the accident occurred because they were sleeping at the time.

The trial court denied all parties' summary judgment motions on August 17, 1998.¹⁰

Procedural History—Smith

On August 8, 1995, the Smiths filed their complaint against ACS, Isaac, and the Walkers in the same Texas court in which the Harrington suit had been tried. The Texas court entered summary judgment in favor of the Smiths on September 14, 1995, ruling that Isaac's negligence on the date of the accident proximately caused Smith's death; that Isaac was acting within the course and scope of his employment at the time of the accident; that an employer-employee relationship existed between Isaac and the Walkers; and that Isaac and the Walkers were jointly and severally liable for the damages and injuries to Smith. On October 27, 1995, the Texas court entered a second summary judgment order, reiterating its previous conclusions and entering the following new conclusions: that an employer-employee relationship existed between Isaac and ACS at the time of the accident, and that ACS was liable jointly and severally with the Walkers for the damages and injuries to Smith.

As it had in the Harrington suit, on October 20, 1995, Indiana Insurance filed a complaint for declaratory relief against ACS in the Smith matter ("Smith declaratory action"). In response, the Smiths filed an original complaint in intervention on February 5, 1996.¹¹

When Indiana Insurance filed its summary judgment motion in the Harrington declaratory action, on April 30, 1998, it also filed a summary judgment motion in the Smith declaratory action. Interestingly, Indiana Insurance argued that because ACS had admitted "that the van driven by Isaac was not owned by ACS but, instead, was owned by the Walkers," and had "admitted that Smith was not acting within the scope of his employment at the time of the [a]ccident," there was no genuine issue that there was no coverage under the hired auto endorsement. Similarly, Indiana Insurance also argued,

While it is true, as established above, that ACS did not own the van involved in the [a]ccident, ACS admits that Smith was not acting in connection with ACS's business.... Consequently, because the van in question was not used in connection with ACS's business, Smith's death is not covered by the `Non-Owned Auto' endorsement to the IndiPack Policy.

The trial court denied all parties' motions for summary judgment in the Smith declaratory action at the same time it denied the Harrington motions, on August 17, 1998. On September 4, 1998, the trial court certified its order...